Global Wage Report 2022-23: The impact of inflation and COVID-19 on wages and purchasing power

Poverty rose sharply, with 75-95 million people pushed into extreme poverty during the covid-19 crisis. Though global poverty is declining again, 2022’s negative wage growth – driven by surging inflation – is likely to worsen inequality, the report notes. This is because low-income households were hit hardest and were more likely to suffer wage and job losses during the crisis.

Inflation in advanced economies rose by 2.4 percentage points in 2020-21 measured on a year-on-year basis, and was expected to climb another 4.1 points in 2021-22. In emerging and developing economies, it was projected to rise by four percentage points over 2021-22, reaching 9.9 per cent by the end of 2022. A significant drop in inflation was anticipated for both groups in 2023.

By late 2021, employment in most high-income countries had returned to or exceeded pre-covid levels, but many middle-income countries still faced employment gaps. Recovery was also slower for women, widening the global gender employment gap.

According to ILO estimates, wage and salaried employment grew by 36 per cent from 2005 to 2021, outpacing the 16 per cent rise in total global employment. This growth, especially noted in low- and middle-income countries, highlights the rising importance of wage employment in shaping household income and influencing income inequality.

In Asia and the Pacific, strong pre-pandemic wage growth in China significantly influenced regional averages, with regional real wage growth in the three years leading up to the pandemic measuring between three and 3.3 per cent. Without China, this drops to 1.5 per cent or less. In 2020, regional wage growth fell to one per cent, turning negative when excluding China. After a brief recovery in 2021, growth declined again in 2022 to 1.3 per cent amid rising inflation.

In 2020, women faced greater job and hour losses than men in most countries. Yet, average wages for women rose more than for men, suggesting a strong composition effect: many low-paid women lost their jobs, raising the average wage of those who remained. This indicates that employment losses among women were more concentrated in lower-paying roles compared to men, the report states.

Among 22 countries for which data was available, wage inequality rose in 10 – most notably in Colombia, Panama, Paraguay and Thailand. On the other hand, it declined in 12, with the sharpest drops seen in Bolivia, the Dominican Republic, Peru and the United States.

Before the pandemic, 327 million workers – 19 per cent of global wage earners – were paid at or below the minimum wage. In the current cost-of-living crisis, properly adjusting minimum wages could significantly improve living standards for low-income households, says the report.

Focus and Factoids by Aseema.

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